Missing out the X Window system and using the browser as GUI ontop of Linux - it's not actually that innovative really. Don't get me wrong, I would give it a whiz on my Netbook, and I want to see how it pans out, but at the moment all this talk of not using it as a desktop PC OS seems to be missing a lot of opportunities and I wonder if Google might change its tune on that. Super fast, super slimline OS, with fast browser running HTML 5 based interfaces to all your business apps - sounds like it might be appealing to enterprises to me.
Anyway, I seem to remember using the browser as the main interface to Linux for some time now - that would Konqueror on KDE - the file manager come browser that shows what IE should have been :-)
Seriously though, not everything has to be in the cloud, there are plenty of lightweight web servers you could run on your local machine, kind of like running Webmin, so surely you could still have Chrome the browser as the interface but access local apps and storage.
Overall, a little underwhelmed by this inital release of information but we will see how it develops won't we ? If you have not seen it yet, check out the Chrome OS demo video on YouTube.